Finally, cash for Maine nursing homes. But is it enough?

Maine’s 107 nursing homes came out of the 2014 legislative session either on shaky financial footing with funding needs neglected or in improved financial shape compared with where the nursing homes stood at the start of the year. But that depends on whom you ask.

Gov. Paul LePage is blaming Democrats in the Maine Legislature for neglecting nursing homes on the brink of shutting down and for failing to care for the state’s elderly. That’s because lawmakers closed out their 2014 session earlier this month without funding a last-minute, LePage-proposed bill that would have directed $5 million in emergency funds toward nursing homes by using tobacco settlement funds the state receives to pay for smoking cessation efforts. The federal government would have matched the $5 million in state funds with more than $8 million.

“We found the revenue to keep nursing homes open and provide care for our most vulnerable citizens, but the Appropriations Committee chose to ignore our elderly,” LePage said in a statement released by his office on May 2, the day the Legislature adjourned. “They talk about helping Maine people, but their actions reveal the height of their hypocrisy.”

But Maine nursing homes are coming out of this legislative session with a promise of $4 million in additional state Medicaid funds in the state fiscal year that starts July 1, and $5 million more in funding in each of the following two years. Those state funds will translate into more than $24 million in federal Medicaid funds over the next three years.

On top of that, a new law will require the state to reset nursing home rates every two years to levels that better reflect recent costs. Nursing homes will receive inflation-based adjustments in the in-between years.

“We felt we were taking an important step forward,” said Rep. Peggy Rotundo, D-Lewiston, who is House chair of the Legislature’s budget-writing committee. “Altogether, this legislature came up with $14 million that draws down additional federal money. It’s a significant amount of money.”

A nursing home shortfall

The Maine Legislature has set aside more than $325 million in Medicaid funds — more than 60 percent is federal money — for nursing homes in each year of the two-year state budget.

But the state disburses that money according to the nursing homes’ audited costs from 2005. Save for a 1.5 percent raise in 2012, Maine’s nursing homes have been paid at 2005 rates for the past six years. In 2011, that meant Maine’s nursing homes were underpaid by $29.4 million, according to the Maine Health Care Association, a group that represents the state’s nursing homes.

The state portion of that underpayment works out to about $11 million.

The fate of Maine’s nursing homes is closely tied to Medicaid funding. Maine’s Medicaid program, known as MaineCare, pays the bills for 68 percent of the nursing homes’ approximately 7,000 residents, according to the Maine Health Care Association.

Maine’s nursing homes handle Medicaid rates that don’t cover the cost of care by shifting costs to the 21 percent of residents who pay for their care from their own assets and to the 11 percent of residents whose bills are paid by Medicare, which pays higher rates than Medicaid.

But at some nursing homes, the percentage of Medicaid residents is as high as 90 percent, leaving few options for spreading the costs. That was the situation behind the 2012 closure of the 52-bed Atlantic Rehabilitation and Nursing Center in Calais, whose residents were forced to move miles away to homes in Eastport, Lubec, Ellsworth and elsewhere.

The funding sources

Starting in July, almost $12 million in new funding — $4 million from the state and the remainder from the federal government — will start flowing to Maine nursing homes. From that pool of funding, nursing homes whose populations comprise more than 70 percent Medicaid patients will receive supplemental payments to ease the financial strain from low Medicaid rates.

Nursing homes can expect a $13 million funding increase in each of the following two state fiscal years, which start July 1, 2015, and July 1, 2016.

The legislation that authorized the first $4 million increase relies on a pool of funds the state expects to recover from assisted living facilities, which offer a level of care less intensive than nursing home care. The state has overpaid those facilities because of a faulty claims system — a state auditor’s report last year found Maine was overpaying assisted living facilities up to $29 million annually — and the state expects to recover those funds.

The legislation authorizing that funding increase became law without LePage’s signature.

The $13 million funding increases in the following years are part of a budget-balancing package passed with overwhelming support in the Legislature but LePage vetoed. The budget package essentially makes the added funding a part of the next two-year state budget that has yet to be developed, proposed and passed into law. The funds would become part of the baseline traditionally used as a starting point for state budgets.

“It was gratifying to see … the bipartisan agreement that nursing homes do need more funding and that the situation was serious,” said Rick Erb, president and CEO of the Maine Health Care Association. “We want to continue to work with all parties to move ahead on the funding issue.”

A rate restructure

While nursing homes are in line for more funding, the additional resources won’t fully close the gap between Medicaid payments and nursing home expenses. But a law change approved by the Legislature should set the state on a course of guaranteeing nursing homes receive Medicaid rates that more closely match costs.

The state’s nursing homes have been paid at 2005 rates for the last six years because Maine — unlike a number of states — has had no requirement in law to reset rates on a regular basis.

“It’s been easy to postpone that, but now they would be required to do it,” said Erb. “It’s just been way too easy to ignore the problem, and that’s how we end up, it seems like every time, six or seven years between rebasing efforts.”

The legislation that took effect earlier this month would require rebasing — updating the year on which Medicaid’s reimbursement rates are based — every two years. The first rebasing will happen July 1, and nursing homes, under state law, will be paid based on their audited costs from 2011. In the short term, however, nursing homes won’t be paid the full amount owed since state funds are limited.

“We’re very appreciative of any additional funding that’s received,” said Erb. “It’s a tough thing to do — for the past several years, and this year was at least as tough as it was before.”

The new legislation — which became law without LePage’s signature — also authorizes a long-term care task force to continue examining the financial condition of nursing homes and the prospects for long-term care system reforms, such as using a pay-for-performance system for nursing homes that rewards them for high-quality care.

While the Legislature has adjourned, LePage has said his administration is searching for discretionary money it can use to help two nursing homes that LePage says are close to shutting down.

Erb, who couldn’t comment on which two nursing homes LePage has referred to, said it’s too early to tell to what extent the new nursing home funding will help.

“Until the money is actually allocated by facility, it’s hard to know what impact it will have,” he said. “There still will be facilities that will have serious financial problems until we come closer to fully funding them.”